United States Reaches $2 Million Settlement with Verizon Federal. Inc, Concerning its Responsibility for the Acts of its Former Technicians who Defrauded the Department of Education

Washington, D.C. - United States Attorney Roscoe C. Howard, Jr, and Inspector General for the Department of Education John P. Higgins, Jr. announced that the United States has reached a $2,000,000 settlement with Verizon Federal, Inc. (formerly Bell Atlantic Federal Systems) concerning its responsibility for the acts of its former employees Maurice W, Hayes and Robert Sweeney. Hayes and Sweeney were participants in a wide-ranging conspiracy to defraud the Department of Education. In February of 2002, Hayes was found guilty by a jury in United States District Court of the three charges against him: one count of conspiracy to defraud the United States with respect to false claims and two counts of theft of government property. Sweeney pled guilty for his participation in the scheme and was sentenced on January 23, 2003. Elizabeth Mellen, a former telecommunications specialist with the Department of Education, also previously pled guilty for her participation in the scheme and will be sentenced March 28, 2003.

The settlement is a result of the United States' contention that Verizon is liable for Hayes's and Sweeney's participation in a scheme through which the Department of Education was defrauded of more than $1,000,000. Verizon has denied liability.

According to the government's evidence, Hayes and Sweeney were technicians employed by Bell Atlantic Federal Systems (now Verizon) who were assigned full-time to the Department of Education to install telephone systems. Any hours, including overtime and holiday hours, that these technicians claimed to work for the Department of Education were billed to and paid for by the Department of Education. Sometime in the 1990's and continuing up until December 9, 1999, Hayes and Sweeney began to claim that they were working far more overtime hours than they had actually worked. Sweeney has testified that he met with Hayes in the mornings to discuss how much time they should put on their time sheets for the prior day's work. They decided that because they were supposedly working together that their time sheets should reflect the same amount of time or it would appear suspicious.

When Robert Sweeney was in Bermuda getting married, he claimed that he was actually at work for the Department of Education. Hayes submitted Sweeney's false time sheets for him while he was away and also fabricated a false time sheet claiming that Sweeney had put in eight hours of overtime on the Saturday. The government's evidence demonstrated that Hayes and Sweeney were outside the District of Columbia making cellular telephone calls at times they claimed to have been working at the Department of Education.

In addition to adding hundreds of unworked hours to their time sheets, the evidence further showed that the technicians also were involved in conspiring with Elizabeth Mellen, a Department of Education telecommunications specialist who served as the Contracting Officer's Technical Representative for the Bell Atlantic contract. The evidence showed that the technicians assisted Mellen with her wide-ranging scheme to obtain large quantities of electronic goods for many of her family members through the Bell Atlantic contract. Sweeney ordered the goods on the Bell Atlantic contract and helped deliver them to the family members. As a reward for the technicians' assistance with personal errands and obtaining the goods, Mellen approved their false labor charges. The technicians kept quiet about all of these activities to ensure that they could continue to double their normal wages with their vastly overstated overtime claims. Elizabeth Mellen and twelve of her co conspirators (in addition to Sweeney) have previously pled guilty for their roles in the scheme. In October 2002, Mellen's husband and nephew were found guilty by a jury in United States District Court of conspiracy to defraud the United States and receipt of stolen government property; Mellen's son was convicted of receipt of stolen government property; Mellen's nephew was also found guilty of theft of government property. They await sentencing.

As a result of this fraudulent scheme, the Department of Education was charged for over $800,000 of false overtime charges and over $300,000 worth of illegitimate goods. The United States' claims against Verizon were based on the False Claims Act, 31 U.S.C. § 3729, which provides for civil penalties of up to $10,000 per claim and treble damages (i.e., three times the amount of the government's loss). Since the revelation of the fraudulent scheme described above, in order to prevent recurrences, Verizon terminated the technicians
involved, made several personnel changes involving managers and others, and instituted internal controls. Additionally, Verizon provided substantial cooperation in the United States' criminal investigation and prosecutions resulting from the fraudulent scheme. As a result, the Department of Education does not intend to take administrative action concerning Verizon's status as a government contractor.

In announcing the settlement, U.S, Attorney Howard and Inspector General Higgins commended members of the Department of Education's Office of Inspector General and Office of the General Counsel. In particular, they praised the outstanding investigative efforts and assistance of OIG Special Agents Brian Hickey and John Hendrickson, OIG auditor Michael Bowman, OIG attorney Howard Sorensen, and Office of the General Counsel attorney Gail Baum. In addition, they commended Assistant U.S. Attorney Rudolph Contreras who coordinated the
civil investigation and settlement discussions.